Managed funds are investment products that are managed by a professional money manager and are offered in a variety of forms to reach a variety of investment objectives. While each managed fund has a unique investment mix, the investor will choose the best portfolio objective for their personal risk tolerance level. Managed funds have gained in popularity for their investment diversification opportunity, offering investors the opportunity to capitalize in the stock market and to balance their investment portfolios across multiple asset classes.
Geared funds are an investment alternative to a margin loan in a brokerage account and they are an attractive investment alternative to many investors. Geared funds often offer the investor a lower fee than a margin account, no margin calls which are attractive for more volatile portfolios, and no need to provide collateral or to pledge the underlying investment as security. Geared funds are generally recommended only for investors who have an aggressive risk tolerance level as they tend to display high volatility.
Property trusts allow an investor to buy shares in a professionally managed portfolio of real estate without actually purchasing the property. An investor will potentially profit from the property value increases over time, will generally receive annual dividend checks and will receive a portion of the generated property rental income. Common properties that will be included in a property trust include retail buildings or spaces, warehouses, office buildings and entertainment complexes. Some property trusts are focused on a specific industry sector while others focus on geographic regions. Property trusts are typically recommended for investors who are seeking income and portfolio stability, potentially nearing or already in retirement. They can also provide a stability asset class for all investor types.
Capital Guaranteed Funds
This type of managed fund is one where the financial institution guarantees the investor that they will not lose their initial capital investment. These investments are best for investors who have a 6-10 year time frame before they will need access to their funds. A variety of techniques are implemented to protect capital such as puts and calls on the underlying investments.
Hedge funds have been growing in popularity in Australia, and while there is not a specific definition for a hedge fund, they are generally managed funds that leverage a variety of investment techniques to provide their investors with a specified target level of return. Hedge funds are typically recommended for investors with a moderately aggressive to aggressive personal risk tolerance level, although they can be suitable to investors of all risk tolerance levels.
Each of these managed fund options is appropriate for certain investors based on their investment objectives, time frames and personal risk tolerance. Managed funds will continue to gain popularity in markets around the world for their flexibility, professional management and opportunity to build a diversified portfolio. This article is provided as information only and is not advice. Investors should consult their financial professional before making any personal financial decisions about their investment portfolio.
Ebele Kemery is Head of Energy Investing at JPMorgan Asset Management and a member of the Global Fixed Income, Currency & Commodities (GFICC) Group. Based in New York, Ms. Ebele Kemery is the head of Energy Investing within the Commodities team. Prior to this role, she provided institutional client relationship management and tailored risk management solutions in the Investment Bank’s Global Commodities Group.